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US bans internet gambling

George Bush, the US president, has signed a new bill banning US-based internet gambling.

14 Oct 2006 09:15 GMT

Las Vegas is exempt from the new law

The bill, passed in congress on Friday, bans internet gamblers from using credit cards, checks and electronic fund transfers to settle their wagers in the US, and is part of a larger bill aimed at bolstering US security.

Analysts believe the industry is one of the most lucrative online markets in the world is a blow to the growing online gambling industry.

Sportingbet PLC and Leisure & Gaming PLC both sold their US operations for $1 hours before the law was passed.

World Gaming PLC directors resigned, leaving the company in the hands of administrators.

Rival Leisure & Gaming has followed suit, selling its US operation to a new firm set up by its chief executive.

PartyGaming PLC, the world's largest gambling company, said it had suspended all real money gaming activities to customers in the US.

Empire Online PLC said it would focus on gaming outside the US, while 888 Holdings PLC said it was considering its options.

Crippling

The loss of US business is crippling - US residents account for half a market that is estimated to be worth $15.5 billion this year in "spend" value, according to the Betting Research Unit at NottinghamBusinessSchool.

The spend value is the amount gambling companies win from their clients - or the amount gamblers lose - and is much less than revenue because most of the revenue is recycled to gamblers in the form of winnings.

Analysts said the industry is now moving in two directions. On one side are the London-based companies which are ending their US bases.

The other is private offshore companies which find it easier to reach US customers through third parties and which are keeping their US businesses.

One such company, Costa Rica-based, Canadian-licenced VegasPoker247, expressed its confidence when it said that it would be able to continue offering online games for money.

"All players' funds are completely secure and we are exploring every available depositing option with our existing payment processors," the company said.

Although US residents account for more than half of the business of online casinos, no major companies are based there because the US has, since 1961, prohibited using telephone transmissions to bet across state lines.